Significant Growth in Contract Manufacturing 2024

Thermo Fisher Scientific has again been recognised for its excellence in contract manufacturing services in the pharmaceutical and biopharmaceutical sectors, receiving five awards in various categories. These accolades, conferred by customers representing big pharma, small pharma, and both segments, mark the 11th consecutive year of recognition. 

The evaluation process involved 98 companies assessed across 23 performance metrics, highlighting Thermo Fisher's consistent leadership in the industry. Louis Garguilo, Chief Editor and Conference Chair at Outsourced Pharma commended Thermo Fisher and other CDMOs for their resilience and adaptability in addressing customer and market needs amidst challenges within the pharmaceutical industry.

The fete achieved by Thermo Fisher marks an important milestone as it highlights the continued growth of contract manufacturing globally, not only in the pharmaceutical industry but also in other sectors. The global contract manufacturing market was valued at USD 246.51 Billion in 2022 and is slated to reach USD 512.74 Billion by 2030 at a CAGR of 9.58 % from 2023-2030. A similar growth trend is also expected in the UK, with Contract Manufacturing Index (CMI) data showing the sector closed 7.5% higher in 2023 than at the end of 2022.

According to CMI, produced by sourcing specialist Qimtek, the UK contract manufacturing landscape improved in Q4 2023, with the CMI standing at 78.5, a notable improvement from the previous quarter's 38.1. 

The CMI data show fabrication was the strongest sector, with a 160% increase from the previous quarter and 12% year-on-year growth, with machining also showing significant improvement, up 51% quarter-on-quarter and 2.4% year-on-year. Other processes, such as moulding and electronics, saw marginal year-on-year growth.

Industrial machinery, however, remained the most significant sector for contract manufacturing throughout the year, followed by food and beverage and electronics. As per Qimtek, the average lead time remains relatively low across industries standing at 22 days throughout the year.

Brief Overview of Contract Manufacturing

Contract manufacturing, also known as international subcontracting or outsourcing, involves one company engaging another company in a different country or region to produce its products. The arrangement involves providing the manufacturer with all necessary requirements and materials for production. 

The contract outlines specifications for product quality, certification, quantity, conditions, and delivery dates, among other factors. It also addresses product testing, inspection, order adjustments, assurances, and payment terms in case of contract violations. 

This practice is utilised across various industries to outsource production to foreign markets, typically resulting in privately branded products or locally where a company seeks to gain certain advantages such as reduced costs to market and compliance with regulations. The Contract Manufacturing Market is a dynamic and integral component of the global manufacturing landscape, facilitating specialised production through outsourcing.

Why consider contract manufacturing

The decision to consider contract manufacturing is compelled by several factors,, which include:

Cost Savings

Contract manufacturing often leads to reduced production costs through economies of scale, access to lower-cost labour markets, and minimised capital expenditure on manufacturing facilities and equipment.

Focus on Core Competencies

By outsourcing production to specialised contract manufacturers, companies can concentrate on their core competencies, such as product development, marketing, and sales, allowing them to remain competitive and innovative in their respective industries.

Access to Expertise and Technology

Contract manufacturers typically possess specialised expertise, advanced technology, and manufacturing capabilities that may not be available in-house. This enables companies to benefit from high-quality production and the latest innovations without investing in expensive infrastructure or training.

Flexibility and Scalability

Contract manufacturing allows companies to scale production up or down quickly in response to market demand fluctuations without the associated risks and costs of maintaining excess capacity.

Global Expansion

Contract manufacturing allows companies to expand their market presence globally by tapping into the capabilities of manufacturers located in different regions without the need for significant upfront investments in new facilities or international operations.

Going forward, the sector is poised for continuous growth, and as companies seek to remain competitive in an ever-evolving world, contract manufacturing offers companies a strategic approach to optimising production efficiency, reducing costs, accessing specialised expertise, and facilitating market expansion, ultimately driving growth and profitability.Contract manufacturing allows companies to expand their market presence globally .